Barama granted concessions for Essequibo project
June 30, 2002
The ten-year tax holiday granted to Barama Company Ltd (BCL) in 1991 is up and the company has not re-applied for the facility but concessions were obtained for BCL’s Essequibo project now underway.
The company brought in US$7 million worth of equipment for the project last week, in the first of two shipments.
General Manager of BCL, Girwar Lalaram, said yesterday that the concessions granted for the Essequibo project must not be seen as an extension of the tax holiday, for this project was being treated separately.
In the new project, through the construction of a road, BCL would be linking Buck Hall, on the Essequibo Coast, with communities in the North West District such as Port Kaituma, Matthews Ridge, Arakaka, Baramita and Koriabo.
Lalaram said, in this context, the company’s contribution to national development was taken into consideration and the tax concessions were obtained for the project. The company would be focusing its operations at Buck Hall for the next ten years.
Apart from the road construction, a forest inventory is being done and harvesting is expected to begin one month from now.
All the facilities for the operation are scheduled to be in place by the end of the year.
The previous government had granted the tax holiday in 1991 under BCL’s investment deal where the company was supposed to have utilised US$50 million in the first three years.
Lalaram said the company had so far invested US$125 million in the local timber industry, and this excluded the Essequibo project.
The South Korean-Malaysian investor received a Timber Sales Agreement (TSA) of 4.13 million acres of land - the largest in Guyana.
The lease approved by government was for 25 years - renewable for another 25 - and most of the land was located in the northwest and Mazaruni-Potaro areas.
The Guyana Forestry Commission had said that BCL’s TSA included penalties government could take against the company if the operations went bad, including cancelling the TSA.
Royalty paid by the company was supposed to have increased every four years by 50%, depending on the species and grades of wood produced.
The primary product of BCL was plywood but the company has recently diversified to sawn timber and log production.
In an interview on Friday with Stabroek News conducted at BCL’s headquarters at Land of Canaan, the company’s managing director, James Keylon, said BCL was bullish on Guyana and here for the long haul.
Keylon noted that the world market for wood products was not doing well. He recalled three years ago when he took up his post in Guyana, the price for plywood was US$300 per cubic metre but it now attracted a price of between US$220-US$230.
"We basically have geared ourselves to run a lean operation. We have sent home most of the expatriates and have placed Guyanese into key slots," he said. The company produces between 6,000-10,000 cubic metres of plywood per month and 600-1,000 cubic metres of sawn timber monthly. The BCL workforce is now between 600-1,200 workers depending on the shifts being operated.
Keylon said two eight-hour shifts are being worked now and the workweek has been cut. He stressed this was not due to the lack of sales or market opportunity but constraints such as the rainy weather and inadequate supply of logs.
Lalaram pointed out that BCL’s concession in the Port Kaituma area had been logged out and this contributed to the decrease in log supply. He said the time gap between closing down the Port Kaituma operation and setting up of the Essequibo project required the company to purchase logs from a third party.
He also noted that many loggers had invested heavily in equipment with a view of supplying logs to BCL and the company wanted to facilitate the loggers.
He stated it is expected that the company would return to 12-hour shifts in August when the operations are working "full blast".
There have been complaints from some loggers about the prices set for logs supplied to the company. Lalaram recalled when the market for plywood was booming loggers enjoyed a high price of $55 per cubic metre but then the market took a downward trend and the price was renegotiated. He assured that the price would be re-examined as soon as the market recovered.
He noted that in January the price was $30 per cubic metre and it was now holding at $37.50. "The logs are the raw material for the finished product and once the price for the product goes up the price for the logs would automatically increase," he said.
Lalaram said BCL had recently begun to purchase hardwood as well as peeler logs from the loggers. This would enable the loggers to have a more cost-efficient operation since they would not just be looking for logs for the manufacture of plywood, he stated.
Keylon said another factor which contributed to the inadequacy of logs at present was that the Guyana forest was not as rich with the logs required for plywood as was anticipated by the company.
He said BCL worked in the Port Kaituma for ten years and may return in another 20 when the trees regenerate.
Lalaram disclosed that BCL was in a joint venture with Guyana Sawmills Ltd and was working with other operations to enter into similar arrangements.
This is being done to use the strengths of the parties involved to achieve a higher level of efficiency, he said. Among BCL’s activities in the joint venture are harvesting and establishment of forest management plans.
Keylon praised the Guyana Forestry Commission for facilitating the BCL investment. He said the commission had been supportive and, in his view, was working hard to move Guyana forward in the forestry sector.
Given the poor state of the world market for timber products, Keylon said BCL was surviving because the company had changed the way it marketed its products. "We have broadened our portfolio to include sawn timber and, to a lesser extent, logs for our export market to give more stability to our revenue strength. Our vision is to dominate the Caribbean market for sawn timber and plywood."
He pointed out that BCL’s aim was to move away from the dependency solely on plywood to bring in revenue. Keylon said the company would retain its US market and had recently moved into China’s sawn lumber market. "We now have the product mix that will carry us forward and it is projected that things would be better in the next 12 months."
He had this to say: "I really think that Guyana offers tremendous opportunities for the forestry sector.
A lot of it has to do with its strategic location for the markets in the US and Caribbean."
He pinpointed one weakness as the small population of the country from which to derive the workforce. He stressed that the local workers of the company, from the rank and file to the executives, performed their functions well.